Question
Sandrine Machinery is a Swiss multinational manufacturing company. Currently, Sandrine's financial planners are considering undertaking a 1-year project in the United States. The project's expected
Sandrine Machinery is a Swiss multinational manufacturing company. Currently, Sandrine's financial planners are considering undertaking a 1-year project in the United States. The project's expected dollar-denominated cash flows consist of an initial investment of $2000 and a cash inflow the following year of $2400. Sandrine estimates that its risk-adjusted cost of capital is 13%. Currently, 1 U.S. dollar will buy 0.84 Swiss franc. In addition, 1-year risk-free securities in the United States are yielding 6.5%, while similar securities in Switzerland are yielding 3%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Do not round intermediate calculations. Open spreadsheet If this project was instead undertaken by a similar U.S.-based company with the same risk-adjusted cost of capital, what would be the net present value and rate of return generated by this project? Round your answers to two decimal places. NPV = $ fill in the blank 2 Rate of return = fill in the blank 3 % What is the expected forward exchange rate 1 year from now? Round your answer to two decimal places. fill in the blank 4 SF per U.S. $ If Sandrine undertakes the project, what is the net present value and rate of return of the project for Sandrine? Do not round intermediate calculations. Round your answers to two decimal places. NPV = fill in the blank 5 Swiss Francs Rate of return = fill in the blank 6 %
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